ROI: How CMOs Measure the Success of Client-Agency Relationships
Marketing budgets are increasingly tight and CMOs struggle to effectively measure ROI and justify investments. In today’s harsh economic climate, C-level executives are asking questions about the accountability of every dollar spent. Even industry heavyweights such as Facebook, Google, and Amazon, are introducing new measurement tools and audit capabilities. Agency management expert Bruno Gralpois explains how these approaches have rapidly gained popularity among marketers and agency managers. Bruno also provides insight into the top three areas brand advertisers are evaluating to measure efficiencies and workflows among their agency partnerships, including performance, value and efficiency.
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In today’s advertising industry, marketing budgets are increasingly tight, and CMOs are struggling to measure ROI and justify their various investments effectively. CMOs are asking their teams about every dollar spent. Some of those dollars are funneled into an investment which gives their marketing teams more talent and time – agency partnership. But, while extremely valuable support systems there are many questions surrounding the best way to rationalize the ROI of these critical relationships.
To do this, left-brained thinkers and their right-brained counterparts must come together to apply the right-brain creative process in the pursuit of measurable results. Even industry heavyweights such as Facebook, Google, and Amazon, are introducing new measurement tools and audit capabilities to better understand the ROI of major investments by brand advertisers. It’s not enough. Top areas brand advertisers must also evaluate cost efficiencies, productivity gains realized by working with their agency partnerships. ROI is not the only meaningful metric. The health of the relationship is another important metric to assess less tangible value-add factors like innovation, creativity and effective collaboration. According to the World Federation of Advertisers, the large majority of brand advertisers have a formal agency evaluation program in place, and an overwhelming number of those feel that those are helping build and maintain strong client-agency relationships.
Even as soon as a few months in, early signs of dissatisfaction in the relationship can be detected and formally addressed. It is common sense that identifying issues early on, before they get to be majorly disruptive to the relationship, is in everyone’s best interest. Too often, either side goes on, leaving unresolved issues to grow like bacterial infections that eventually end up killing the partnership. When a performance evaluation is done at the onset of any new relationship, it sets up a baseline to compare future evaluations against. It encourages both agencies and advertisers to be accountable to each other from day one.
Outlining key performance indicators (KPIs) for client-agency relationships is a good starting place. These KPIs must be exclusively composed of metrics that are under the agency’s control. Common quantitative KPIs include campaign results such as gains in awareness and consideration. They also often include business results such as market share and revenue growth. The metrics used are likely to be part of the company’s own regular overall business metrics. The weight assigned to each type of performance metric varies by client.
The quantitative aspect of performance evaluations is typically core to the way a company runs its business and measures success in the partnership.
Most advertisers use a structured survey to capture 360-degree feedback on each other’s performance. It typically involves these distinct but complementary dimensions:
- Feedback from the client assessing its agencies
- Feedback from the agencies assessing the client teams
- Agencies self-assessing (and sometimes clients conducting a self-assessment)
- Agencies assessing other agencies they are collaborating with on the client’s behalf.
This data will be used to inform findings-based conversations about how to improve the partnership. It might even be used to determine incentive-based payments if such an agreement is in place. Everyone involved should have a clear understanding of how they will benefit from the evaluation. Both parties must trust the information captured will be used in a constructive and reasonable manner. Then both parties analyze it, review it together, and agree on immediate actions they can take to leverage this insight or course-correct if needed.
As we all know from experience, evaluating employee performance is one of the most crucial processes lead by responsible employers. It’s about driving individual excellence and developing high-performing teams. The same goes for evaluating your agency partners. Consider these rules of evaluation engagement:
- Commit to providing actionable feedback and be open to receiving feedback as well.
- Spend quality time selecting a set of questions that will draw meaningful insight.
- Set up a regular performance evaluation process to capture, analyze and share the results.
- Identify specific action plans on both sides to improve the work and relationship.
- Implement the identified action plans and regularly monitor for later course correction and continuous improvements.
A relationship between an advertiser and its agency(ies) is a significant investment in time, effort, and resources. It’s therefore imperative to evaluate the return on that investment and continuously fine-tune it. Every relationship deserves, and benefits from, a constructive, honest feedback-loop process.